Florida and New York joining the rush online?

The latest US states to announce an intention to take advantage of the recent change in the Department of Justice’s interpretation of the Wire Act are New York and Florida.

In Florida the 13-page DoJ opinion change excited attention by finding that proposals by New York and Illinois to sell lottery tickets online to adults within their states did not violate the 1961 Wire Act.

“I had a strong feeling that this day would come,” said Rep. Joseph Abruzzo, a Florida Democrat who for several years has unsuccessfully pushed for online poker. “It’s very important to me that we have internet gaming.”

Gov. Rick Scott recently said he wants to increase ticket sales to allow a $1 billion increase in the state’s education budget. The lottery brought in about $4 billion last year. About 98 percent goes for education, as required by the voter-approved amendment that created it in 1986.

Scott has not yet taken a position on online sales, but he has endorsed distributing more lottery-ticket vending machines and a change in state law to let the Florida Lottery install so-called full service machines that sell both scratch-off tickets and online games such as Powerball.

Like other states, Florida has to tread carefully around its compacts with tribal groups when it comes to online operations. Compliance with the compact the state has with the Seminole Tribe will be the focus of attention in any initiatives. Abruzzo, who participated in drafting the compact, says online sales would not violate the compact.

Abruzzo says he will not push for online ticket sales for other Florida Lottery games now but will file an amendment to an existing gambling bill that would allow the Florida Lottery to offer online poker.

“The difference between online lottery and online poker is that poker is taking place anyway,” Abruzzo said. “We’re harnessing in what’s already taking place. With the major offshore operators being shut down, we should be the only legal game in town.”

Several states, including Minnesota, New York, North Dakota and New Hampshire, offer online subscriptions to a limited number of their lottery games.

Some preliminary assessment work has already been done by Florida state officials; the legislature’s Office of Program Policy Analysis and Accountability released a report earlier this year that estimated annual online subscription sales could generate $10 million for education.

The Florida Lottery, which has not taken a position on online ticket sales, is currently analysing the department’s legal opinion, according to a spokesperson.

In New York, lottery spokesmen said the DoJ reversal was being studied, and that the state is looking for ways to expand its lottery to generate extra revenue. Among the state’s now well advanced plans is a new computer system that will allow adult residents to buy tickets online and then pick them up at a retail location. Other tickets will be “virtual,” delivered over the Internet to computers or mobile phones.

The system, completed last year, will build on a subscription program for Lotto and Mega Millions introduced in 2005.

State lotteries across the US already account for $56 billion in annual sales, and this could be boosted by more internet activity following the DoJ decision. With states facing an estimated collective budget deficit of $31.9 billion next year, the need for additional revenues has rarely been greater, according to a report by the National Conference of State Legislatures.

Those revenues could come from legalised internet gambling, on which the American Gaming Association estimates US players spent around $4 billion despite restrictions last year, well up on the $2.4 billion spent in 2009.

Of the 43 states with lotteries, 26 saw revenue grow in traditional games in the last fiscal year, with total sales up 3 percent.

“All state lotteries are looking at how we can expand our base and sell tickets,” said Andi Brancato, a spokeswoman for the Michigan Lottery. Internet sales are “definitely in the mix for everyone.”

Lottery officials will now feel freer to set up online games and perhaps join other states on Internet sales, said Joseph Kelly, a professor of business law at Buffalo State College in New York and a consultant for the gambling industry. “It could be very important for the states,” Kelly said.

California is also reviewing the ruling, according to Russ Lopez, a spokesman for the state lottery, whilst in Illinois the state lottery will begin testing online sales of Powerball, Mega Millions and Lotto tickets by the second quarter, Michael Jones, the lottery superintendent, said.

Internet sales could attract 300,000 to 500,000 new customers “who philosophically support the lottery but blow right past” ticket outlets at convenience stores, Jones said, creating the possibility for significant hikes in state revenue.

In a Reuters television interview, Frank Fahrenkopf, chief exec at the American Gaming Association, reiterated the need for Congress to act quickly in passing laws that exclude unlicensed and – in his view – unsafe online casinos that may seek to take advantage of the changed Justice policy on the Wire Act.

He confirmed the AGA preference for a federal rather than state-by-state solution to legalised online gambling but acknowledged that the policy change has opened up the possibilities in the market whilst at the same time creating confusion regarding what is legal and what is not. He added that major land gambling groups within his trade association would enter a legalised online gambling sector.

“It’s now clear that not only can lotteries sell tickets online, but also games that look like slot machines and poker,” Fahrenkopf said in other media interviews. “That’s where they [the states] want to go.”

Confirmation of Fahrenkopf’s view came when the prospectus for Caesars Entertainment’s IPO next year surfaced during the week at:

http://services.corporate-ir.net/SEC.Enhanced/SecCapsule.aspx?c=84772&fid=7232166.

The document includes a section on the giant group’s attitude to online gambling and the possibilities that may lie ahead for it as an extension of existing business.

It observes that “additional jurisdictions” will legalise online gambling to meet consumer demand, and that there is now a broader understanding of the need to both regulate activity and generate tax revenues.

“As such, we support efforts to regulate the online gaming industry to ensure that consumers are protected,” the document notes. “We believe that the potential for online gaming is substantial and believe that we will command, at a minimum, our fair share in any legal jurisdiction.

“An H2 Gaming Capital study conducted in 2010 projects that the global online gaming market will grow to $36 billion in revenues by 2012. We believe that the largest opportunity in online gaming in the near term is the legalization of online poker in the United States.”

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